How to Get Restaurant Investors

Three methods to consider when looking to fund a fast casual

For those thinking of joining the fray of fast casual concepts, consider that the first order of business—funding your growth—isn’t easy anymore.

Rapid expansion is no longer likely. Strategic buyers—i.e., large restaurant chains—aren’t snapping up small players like they once did (McDonald’s funding Chipotle from 15 units to 500, for example). Instead, many traditional fast-feeders are giving their own restaurants a fast casual spin. Rehabbed Wendy’s and Taco Bell units, for instance, now bear a striking resemblance to Chipotle. Casual dining restaurants like Red Robin and Famous Dave’s are also jumping into the fray, experimenting or creating  fast casual spinoffs.

That said, the money hurdle can be jumped. Consider the following:

1. Dig into your own wallet and tap family, friends and angel investors. “The first one is the hardest,” says Gary Levy of New York-based CohnReznick. “If it is a grand-slam, capital for the second one should come easier.”

2. Eating is believing. Bruxie Gourmet Waffle Sandwiches in Southern California secured its second round of financing after private investors got a taste of the menu and brought in additional investors.

3. Demonstrate scalability through systems to measure sales and earnings. That’s what clinched the deal for five-unit Mendocino Farms, a Los Angeles-based gourmet sandwich shop that received a capital investment from Catterton Partners last summer, and eight-unit Burger Lounge, a San Diego-based concept that’s expanded with backing from KarpReilly.